ALMARAI COMPANY A SAUDI JOINT STOCK COMPANY

Transcription

1 THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND REVIEW REPORT FOR THE THREE MONTHS

2 INDEX REVIEW REPORT 1 PAGES INTERIM CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2013 (UNAUDITED) 2 INTERIM CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS PERIOD (UNAUDITED) 3 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS PERIOD (UNAUDITED) 4 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTHS PERIOD (UNAUDITED) 5 NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS PERIOD (UNAUDITED) 6-19

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4 INTERIM CONSOLIDATED BALANCE SHEET AS AT 31 MARCH December 2013 Notes (Unaudited) (Audited) (Unaudited) SAR '000 SAR '000 SAR '000 ASSETS Current Assets Cash and Cash Equivalents 1,793, , ,859 Derivative Financial Instruments 5,304 34,934 15,016 Receivables and Prepayments 949, , ,520 Inventories 2,517,373 2,317,097 1,825,417 Total Current Assets 5,265,785 3,561,023 2,998,812 Non Current Assets Investments 4 251, , ,672 Property, Plant and Equipment 13,845,000 13,415,836 11,853,786 Biological Assets 918, , ,584 Intangible Assets - Goodwill 1,335,455 1,335,455 1,382,978 Deferred Charges 46,491 50,756 49,351 Deferred Tax Asset 9,836 10,222 16,094 Total Non Current Assets 16,406,795 15,957,625 14,703,465 TOTAL ASSETS 21,672,580 19,518,648 17,702,277 LIABILITIES AND EQUITY LIABILITIES Current Liabilities Short Term Loans 5 1,355,375 1,399,818 1,186,329 Payables and Accruals 2,093,554 2,176,575 1,658,613 Derivative Financial Instruments 103, ,977 88,622 Total Current Liabilities 3,552,336 3,679,370 2,933,564 Non Current Liabilities Long Term Loans 5 9,323,512 7,254,743 6,477,712 Employees' Termination Benefits 301, , ,927 Deferred Tax Liability 123, , ,794 Total Non Current Liabilities 9,748,879 7,668,288 6,877,433 TOTAL LIABILITIES 13,301,215 11,347,658 9,810,997 EQUITY Shareholders' Equity Share Capital 4,000,000 4,000,000 2,300,000 Share Premium - - 1,600,500 Statutory Reserve 912, , ,854 Other Reserves (237,979) (189,861) 121,790 Treasury Shares (95,282) (95,282) (97,757) Retained Earnings 3,176,752 2,921,667 2,484,221 Total Shareholders' Equity 7,756,408 7,549,441 7,177,608 Minority Interest 614, , ,672 TOTAL EQUITY 8,371,365 8,170,990 7,891,280 TOTAL LIABILITIES AND EQUITY 21,672,580 19,518,648 17,702,277 The accompanying notes form an integral part of these interim consolidated financial statements. 2

5 INTERIM CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS PERIOD 2013 Notes (Unaudited) (Unaudited) SAR '000 SAR '000 Sales 6 2,411,031 2,040,349 Cost of Sales (1,583,236) (1,333,045) Gross Profit 827, ,304 Selling and Distribution Expenses (450,124) (344,710) General and Administration Expenses (76,835) (70,138) Net Operating Income 300, ,456 Share of Results of Associates and Joint Ventures (5,989) (12,314) Finance Charges (38,768) (27,384) Income from Main Operations 256, ,758 Zakat and Foreign Income Tax (7,586) (7,886) Income before Minority Interest 248, ,872 Minority Interest 6,592 (2,753) Net Income for the Period 255, ,119 Earnings per Share (SAR) 7 - Income from Main Operations - Net Income for the Period The accompanying notes form an integral part of these interim consolidated financial statements. 3

6 INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS PERIOD 2013 Note (Unaudited) (Unaudited) SAR '000 SAR '000 OPERATING ACTIVITIES Net Income for the Period 255, ,119 Adjustments for: Depreciation of Property, Plant and Equipment 258, ,379 Net Appreciation of Biological Assets (49,665) (50,305) Profit on Sale of Property, Plant and Equipment (2,915) (4,576) Loss on Sale of Biological Assets 7,989 9,547 Finance Charges Accrued 38,768 27,384 Zakat and Foreign Income Tax Accrued 7,586 7,886 Share of Results of Associates and Joint Ventures 5,989 12,314 Change in Employees' Termination Benefits 14,918 10,446 Share Based Payment Expense 1,632 1,540 Minority Interest (6,592) 2,753 Zakat and Foreign Income Tax Paid (719) (1,343) Changes in: Receivables and Prepayments (163,532) (110,458) Inventories (210,282) (19,131) Payables and Accruals (103,230) 49,878 Cash Flows from Operating Activities 53, ,433 INVESTING ACTIVITIES Additions to Property, Plant and Equipment (714,682) (883,781) Additions to Biological Assets (14,772) (6,450) Proceeds from the Sale of Property, Plant and Equipment 10,899 7,589 Proceeds from the Sale of Biological Assets 38,965 33,183 Acquisition of Subsidiaries, Net of Cash Acquired - 17,008 Investment in Associates and Joint Ventures 4 (2,830) - Cash Flows used in Investing Activities (682,420) (832,451) FINANCING ACTIVITIES Increase in Loans, net 2,037, ,350 Finance Charges Paid (35,850) (52,153) Change in Deferred Charges 4,265 4,485 Distribution to Minority Interests - (784) Cash Flows from Financing Activities 2,005, ,898 Currency Translation Impact on Cash and Cash Equivalents (872) - Increase in Cash and Cash Equivalents 1,376,292 15,880 Cash and Cash Equivalents at 1 January 417, ,979 Cash and Cash Equivalents at 1,793, ,859 The accompanying notes form an integral part of these interim consolidated financial statements. 4

7 INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE THREE MONTHS PERIOD Attributable to equity holders of the Company Share Capital Share Premium Statutory Reserve Other Reserves Treasury Shares Retained Earnings Total Shareholders' Equity Minority Interest Total Equity (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 Balance at 1 January 2,300,000 1,600, ,854 (95,238) (97,757) 2,242,102 6,718,461 59,191 6,777,652 Net Income for the Period , ,119 2, ,872 Acquisition of Subsidiaries , ,512 Distribution to Minority Interests (784) (784) Share Based Payment Transactions , ,540-1,540 Net Movement in available for sale Investments , , ,000 Net Movement on Cash Flow Hedges , ,488-26,488 Balance at 2,300,000 1,600, , ,790 (97,757) 2,484,221 7,177, ,672 7,891,280 Balance at 1 January ,000, ,917 (189,861) (95,282) 2,921,667 7,549, ,549 8,170,990 Net Income for the Period , ,085 (6,592) 248,493 Share Based Payment Transactions , ,632-1,632 Net Movement in available for sale Investments , ,333-10,333 Net Movement on Cash Flow Hedges (30,060) - - (30,060) - (30,060) Currency Translation Differences (30,023) - - (30,023) - (30,023) Balance at ,000, ,917 (237,979) (95,282) 3,176,752 7,756, ,957 8,371,365 The accompanying notes form an integral part of these interim consolidated financial statements. 5

8 1. THE COMPANY, ITS SUBSIDIARIES AND ITS BUSINESS DESCRIPTION Almarai Company (the Company ) is a Saudi Joint Stock Company, which was converted on 2 Rajab 1426 A.H. (8 August 2005). The Company initially commenced trading on 19 Dl Hijjah 1411 A.H. (1 July 1991) and operates under Commercial Registration No Prior to the consolidation of activities in 1991, the core business traded between 1976 and 1991 under the Almarai brand name. The Company and its subsidiaries (together, the Group ) are a major integrated consumer food group in the Middle East with leading market shares in Saudi Arabia and the neighbouring Gulf Cooperation Council (GCC) countries. The dairy, fruit juices and related food business is operated under the Almarai, Beyti and Teeba brand names. All raw milk production and related processing along with dairy food manufacturing activities are undertaken in Saudi Arabia, United Arab Emirates (UAE), Egypt and Jordan. Final consumer products are distributed from the manufacturing facilities in these countries to local distribution centres by the Group s long haul distribution fleet. Bakery products are manufactured and traded by Western Bakeries Company Limited and Modern Food Industries Limited under the brand names L usine and 7 Days respectively. International Baking Services Company Limited has ceased trading. These are Limited Liability companies registered in Saudi Arabia and based in Jeddah. Poultry products are manufactured and traded by Hail Agricultural Development Company (HADCO) under the Alyoum brand. HADCO is a closed joint stock company registered in Saudi Arabia and based in Hail. Almarai Baby Food Company Limited is a limited liability company registered in Saudi Arabia. It owns a modern infant formula manufacturing plant in Al Kharj, which is leased to International Pediatric Nutrition Company (a joint venture between Mead Johnson and the Company). The distribution centres in the GCC countries (except for Bahrain and Oman) are managed by the Group and operate within Distributor Agency Agreements as follows: Kuwait Qatar United Arab Emirates - Al Kharafi Brothers Dairy Products Company Limited - Khalid for Foodstuff and Trading Company - Bustan Al Khaleej Establishment The Group operates in Bahrain through its subsidiary Almarai Company Bahrain S.P.C and in Oman through its subsidiaries Arabian Planets for Trade and Marketing L.L.C. and Alyoum for Food Products Company L.L.C. The Group owns and operates arable farms in Argentina through three of its Argentinean subsidiaries Fondomonte Inversiones Argentina S.A., Fondomonte El Descanso S.A. and Fondomonte Sandoval S.A. The Group owns and operates milk production, processing and dairy food manufacturing in Egypt and Jordan through its subsidiaries International Company For Agricultural Industries Projects (Beyti) and Teeba Investment For Developed Food Processing Company respectively. The Group s Head Office is located at the following address: Exit 7, North Circle Road Al Izdihar District P.O. Box 8524 Riyadh Saudi Arabia On 13 Jamad Awal 1434 A.H. (25 March 2013) United Farmers Holding Company ( UFHC ) was incorporated as a limited liability company in the Kingdom of Saudi Arabia. Almarai Company has contributed SAR 330,000 for a 33% share holding. UFHC has been incorporated to make long term investments in the agricultural sector in order to develop sustainable sources of food, grain and fodder on a global scale. 6

9 Details of subsidiary companies are as follows: Name of Subsidiary Country of Functional Direct and Beneficial Business Activity Incorporation Currency Ownership Interest Shares 2013 Capital Issued Almarai Investment Company Limited Saudi Arabia Holding Company SAR 100% 100% SAR 1,000, ,000 Almarai Baby Food Company Limited Saudi Arabia Manufacturing and Trading SAR SAR 100% 100% Company 200,000,000 20,000,000 Hail Agricultural Development Company Saudi Arabia Poultry / Agricultural SAR SAR 100% 100% Company 300,000,000 30,000,000 Western Bakeries Company Limited Saudi Arabia Bakery Company SAR 100% 100% SAR 200,000, ,000 International B aking S ervices Company SAR Saudi Arabia Holding Company SAR 100% 100% Limited 500, Modern Food Industries Limited Saudi Arabia Bakery Company SAR 60% 60% SAR 70,000,000 70,000 Agricultural Input Company Limited SAR Saudi Arabia Agricultural Company SAR 52% 52% (Mudkhalat) 25,000, Nourlac Company Limited Saudi Arabia Trading Company SAR 100% 100% SAR 3,000,000 3,000 Fondomonte El Descanso S.A. Argentina Agricultural Company ARG 100% 100% ARG 27,475,914 27,475,914 Fondomonte Inversiones Argentina S.A. Argentina Agricultural Company ARG 100% 100% ARG 17,849,997 17,849,997 Fondomonte Sandoval S.A. Argentina Agricultural Company ARG 100% 100% ARG 4,383,432 4,383,432 Agro Terra S.A. Argentina Dormant ARG 100% 100% ARG 475, ,875 Almarai Company Bahrain S.P.C. Bahrain Sales Company BHD 100% 100% BHD 100,000 1,000 Almarai International Holding W.L.L. Bahrain Holding Company BHD 100% 100% BHD 250,000 2,500 Almarai Investment Holding Company W.L.L. Bahrain Holding Company BHD 100% 100% BHD 250,000 2,500 IDJ Bahrain Holding Company W.L.L. Bahrain Holding Company BHD 52% 52% BHD 250,000 2,500 7

10 Name of Subsidiary Country of Functional Direct and Beneficial Business Activity Incorporation Currency Ownership Interest Shares 2013 Capital Issued International Dairy and Juice Limited Bermuda Holding Company USD 52% 52% USD 7,000,000 7,000,000 International Dairy and Juice (Egypt) Limited Egypt Holding Company EGP 52% 52% EGP 50,000,000 5,000,000 International Company for Agricultural Manufacturing and Trading EGP Egypt EGP 52% 52% Industries Projects (Beyti) (SAE) Company 317,159,000 31,715,900 Markley Holdings Limited Jersey Dormant GBP 100% 100% - - Teeba Investment for Developed Food JOD Jordan Manufacturing Company JOD 39% 39% Processing 49,675,352 49,675,352 Al Rawabi for juice and UHT milk JOD Jordan Manufacturing Company JOD 39% 39% Manufacturing 500, ,000 Al Muthedoon for Dairy Production Jordan Manufacturing Company JOD 39% 39% JOD 500, ,000 Al Atheer Agricultural Company Jordan Agricultural Company JOD 39% 39% JOD 750, ,000 Al Namouthjya for Plastic Production Jordan Manufacturing Company JOD 39% 39% JOD 250, ,000 Arabian Planets for Trade and Marketing OMR Oman Sales Company OMR 90% 90% L.L.C. 150, ,000 Alyoum for Food Products Company L.L.C. Oman Sales Company OMR 100% 100% OMR 20,000 20,000 Fondomonte Inversiones S.L. Spain Holding Company EUR 100% 100% EUR 13,047,134 13,047,134 International Dairy and Juice (Dubai) Limited United Arab USD Holding Company AED 52% 52% Emirates 22,042,183 22,042,183 Almarai Emirates Company L.L.C. United Arab Emirates Sales Company AED 100% 100% AED 300,000 (Unpaid) 300 8

11 2. BASIS OF ACCOUNTING, PREPARATION, CONSOLIDATION AND PRESENTATION OF INTERIM CONSOLIDATED FINANCIAL STATEMENTS (a) The interim consolidated financial statements have been prepared on the accrual basis under the historical cost convention (except for derivative financial instruments and investments that have been measured at fair value) and in compliance with the accounting standards issued by the Saudi Organisation for Certified Public Accountants (SOCPA). (b) When necessary, prior period comparatives have been regrouped or adjusted on a basis consistent with current period classification. (c) These interim consolidated financial statements include assets, liabilities and the results of the operations of Almarai Company ( the Company ) and its subsidiaries ( the Group ) as set out in note (1) above. A subsidiary company is that in which the Company has, directly or indirectly, a long term investment comprising an interest of more than 50% in the voting capital or over which it exerts practical control. A subsidiary company is consolidated from the date on which the Company obtains control until the date that control ceases. The interim consolidated financial statements are prepared on the basis of the individual financial statements of the Company and the financial statements of its subsidiaries, as adjusted by the elimination of all significant inter group balances and transactions. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. The Company and its Subsidiaries have identical reporting periods. Minority interests represent the portion of profit or loss and net assets not controlled by the Group and are presented separately in the interim consolidated statement of income and within equity in the interim consolidated balance sheet. (d) The preparation of interim consolidated financial statements, in conformity with accounting standards generally accepted in Saudi Arabia, requires the use of estimates and assumptions. Such estimates and assumptions may affect the balances reported for certain assets and liabilities as well as the disclosure of certain contingent assets and liabilities as at the balance sheet date. Any estimates or assumptions affecting assets and liabilities may also affect the reported revenues and expenses for the same reporting period. Although these estimates are based on management s best knowledge of current events and actions, actual results ultimately may differ from those estimates. (e) The figures in these interim consolidated financial statements are rounded to the nearest thousand. (f) The operating results reported in the interim consolidated statement of income, present a fair picture of the past performance of the Group, but are not necessarily indicative of future results. 3. SIGNIFICANT ACCOUNTING POLICIES A. Cash and Cash Equivalents For the purposes of the interim consolidated statement of cash flows, cash and cash equivalents consists of cash at bank, cash on hand, and short-term deposits that are readily convertible into known amounts of cash and have a maturity of three months or less when purchased. B. Accounts Receivable Accounts receivable are carried at the original invoiced amount less any provision made for doubtful debts. Provision is made for all debts for which the collection is considered doubtful or which are more than three months due. Bad debts are written off as incurred. C. Inventory Valuation Inventory is stated at the lower of cost and net realisable value. In general, cost is determined on a weighted average basis and includes transport and handling costs. In the case of manufactured products, cost includes all direct expenditure based on the normal level of activity. Net realisable value comprises estimated selling price less further production costs to completion and appropriate selling and distribution costs. Provision is made, where necessary, for obsolete, slow moving and defective stocks. 9

12 D. Investments a. Investment in Associates and Joint Ventures The investments in associates and joint ventures are accounted for under the equity method of accounting when the Company exercises significant influence over the entity and where the entity is not a subsidiary. Investments in associates and joint ventures are carried in the interim consolidated balance sheet at cost, plus post-acquisition changes in the Company s share of net assets of the associates and joint ventures less any impairment in value. The interim consolidated statement of income reflects the Company s share of the results of its associates and joint ventures. Unrealized gains and losses resulting from transactions between the Company, its associates and joint ventures are eliminated to the extent of the Company s interest in the associates and joint ventures. b. Available for Sale Investments Available for Sale Investments are measured and carried in the interim consolidated balance sheet at fair value with unrealised gains or losses recognised directly in equity. When the investment is disposed of or impaired the cumulative gain or loss previously recorded in equity is recognised in the interim consolidated statement of income. Where there is no market for the investments, cost is taken as the most appropriate, objective and reliable measurement of fair value of the investments. E. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation and depreciated on a straight line basis according to the following useful economic lives: Buildings Plant, Machinery and Equipment Motor Vehicles Land and Capital Work in Progress are not depreciated years 1 20 years 6 8 years F. Biological Assets Biological assets are stated at cost of purchase or at the cost of rearing or growing to the point of commercial production, less accumulated depreciation. The costs of immature biological assets are determined by the cost of rearing or growing to their respective age. Biological assets are depreciated on a straight line basis to their estimated residual value based on commercial production periods ranging from 36 weeks to 50 years summarized below: Dairy Herd Plantations Poultry Flock 4 years years 36 weeks G. Impairment The carrying values of property, plant and equipment, biological assets and investments and financial assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Impairment losses are expensed in the interim consolidated statement of income. For property, plant and equipment and biological assets, where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized as income immediately in the interim consolidated statement of income. 10

13 H. Intangibles - Goodwill Goodwill represents the difference between the cost of businesses acquired and the Group s share in the net fair value of the acquiree s assets, liabilities and contingent liabilities at the date of acquisition. Goodwill arising on acquisitions is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. I. Accounts payable and accruals Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. J. Zakat and Foreign Income Tax Zakat is provided for in the interim consolidated financial statements on the basis of an estimated Zakat assessment carried out in accordance with Saudi Department of Zakat and Income Tax (DZIT) regulations. Income tax for foreign entities is provided for in the interim consolidated financial statements on the basis of an estimated income tax assessment carried out in accordance with the relevant income tax regulations of the countries in which they operate. Adjustments arising from final Zakat and Foreign income tax assessments are recorded in the period in which such assessments are made. K. Deferred Tax Deferred income tax is provided for foreign subsidiaries, using the liability method, on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have been enacted in the respective countries at the reporting date. Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised. The carrying amount of deferred income tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. L. Derivative Financial Instruments and Hedging Forward foreign exchange contracts are entered into to hedge exposure to changes in currency rates on purchases and other expenditures of the Group. Commission rate swap agreements are entered into to hedge the exposure to commission rate changes of the Group s borrowings. Forward purchase commodity contracts are entered into to hedge exposure to changes in the price of commodities used by the Group. All hedges are expected to be in the range of % effective and are assessed on an ongoing basis. All hedges are treated as cash flow hedges and gains / losses at market valuation are recorded as derivative financial instruments in the interim consolidated balance sheet and taken to other reserves in Shareholders Equity. When the hedging instrument matures or expires any associated gain or loss in Other Reserves is reclassified to the interim consolidated statement of income, or the underlying asset purchased that was subjected to the hedge. M. Employees Termination Benefits Employees termination benefits are payable as a lump sum to all employees employed under the terms and conditions of the respective GCC Labour and Workman Laws on termination of their employment contracts. The liability is calculated as the current value of the vested benefits to which the employee is entitled, should the employee leave at the balance sheet date. Termination payments are based on the employees final salaries and allowances and their cumulative years of service, in compliance with the conditions stated in the laws of the respective GCC countries. 11

14 N. Statutory Reserve In accordance with its by-laws and the Regulations for Companies in Saudi Arabia, the Company is required each year to transfer 10% of its net income to a Statutory Reserve until such reserve equals 50% of its share capital. This Statutory Reserve is not available for distribution to Shareholders. O. Treasury Shares Own equity instruments that are reacquired (treasury shares) are recognised at cost and presented as a deduction from equity and are as adjusted for any transaction costs, dividends and gains or losses on sale of such shares. No gain or loss is recognised in the interim consolidated statement of income on the purchase, sale, issue or cancellation of the Company s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognised in share premium. Share options, as contemplated in the following paragraph that were exercised during the reporting period, were satisfied with treasury shares. P. Share Based Payment Transactions Employees of the Company receive remuneration in the form of share based payment transactions under the Employee Stock Participation Program, whereby employees render services as consideration for the option to purchase equity instruments at a predetermined price (equity settled transactions). The cost of equity settled transactions is recognised, together with a corresponding increase in other capital reserves, in equity, over the period in which the service conditions are fulfilled. The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company s best estimate of the number of equity instruments that will ultimately vest. The interim consolidated statement of income expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in Employee Costs. When the terms of an equity settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share based payment transaction, or is otherwise beneficial to the employee as measured at the date of the modification. When an equity settled award is terminated, it is treated as if it vested on the date of termination, and any expense not yet recognised for the award is recognised immediately. This includes any award where non vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the terminated award, and designated as a replacement award on the date that it is granted, the terminated and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. Q. Conversion of Foreign Currency Transactions During the financial period foreign currency transactions are converted and booked in Saudi Riyals at standard exchange rates which are periodically set to reflect average market rates or forward rates if the transactions were so covered. At the balance sheet date, assets and liabilities denominated in foreign currencies are converted into Saudi Riyals at the exchange rates ruling on such date or at the forward purchase rates if so covered. Any resulting exchange variances are charged or credited to the interim consolidated statement of income as appropriate. The functional currencies of foreign subsidiaries are listed in note 1. As at the reporting date, the assets and liabilities of these subsidiaries are translated into the functional and presentation currency of the Group, Saudi Riyal (SAR), at the rate of exchange ruling at the balance sheet date and their income statements are translated at the weighted average exchange rates for the period. Components of equity, other than retained earnings, are translated at the rate ruling at the date of occurrence of each component. Translation adjustments in respect of these components of equity are recorded as a separate component of shareholders equity. 12

15 R. Revenue Recognition Products are sold principally on a sale or return basis. Revenue is recognised on delivery of products to customers by the Group or its distributors, at which time risk and reward passes, subject to the physical return of expired products. Adjustment is made in respect of known actual returns. Revenue from the sale of wheat guaranteed to be sold to the Government is recognised upon completion of harvest but the profit on any undelivered quantities is deferred until delivered to the Government. S. Government Grants Government grants are recognized when there is a reasonable assurance that they will be received from the state authority. When the grant relates to an expense item, it is recognized as income over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate. T. Selling, Distribution, General and Administration Expenses Selling, Distribution, General and Administration Expenses include direct and indirect costs not specifically part of Cost of Sales as required under accounting standards generally accepted in Saudi Arabia. Allocations between Cost of Sales and Selling, Distribution, General and Administration Expenses, when required, are made on a consistent basis. The Group charges payments in respect of long term agreements with customers and distributors to Selling and Distribution Expenses. U. Management Fees The fees charged in respect of the management of Arable Farms are credited to General and Administration Expenses. V. Operating Leases Rentals in respect of operating leases are charged to the interim consolidated statement of income over the terms of the leases. W. Borrowing Costs Borrowing costs that are directly attributable to the construction of an asset are capitalized up to stage when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed and, thereafter, such costs are charged to the consolidated statement of income. X. Segmental Reporting A segment is a distinguishable component of the group that is engaged either in selling/providing products or services (a business segment) or in selling/providing products or services within a particular economic environment (a geographic segment), which is subject to risks and rewards that are different from those of other segments. 13

16 4. INVESTMENTS The investments in associated companies, joint ventures and available for sale comprise of the following: Investments in Associates and Joint Ventures December (Unaudited) (Audited) (Unaudited) SAR '000 SAR '000 SAR '000 Pure Breed Company 21.5% 37,316 36,886 34,826 International Pediatric Nutrition Company 50.0% 7,760 11,679 4,641 Almarai Company W.L.L. 50.0% United Farmers Holding Company 33.0% ,610 48,769 39,671 Available for Sale Investments Zain Equity Investment 2.1% 191, , ,250 Zain Subordinated Founding Shareholders' Loan ,587 Jannat for Agricultural Investment Company 10.0% 7,000 7,000 7,000 National Company for Tourism 1.1% 4,500 4,500 4,500 National Seeds and Agricultural Services Company 7.0% 2,064 2,064 2,064 United Dairy Farms Company 8.3% , , , , , ,672 14

17 (a) The investment in associated companies and joint ventures comprises the following: December (Unaudited) (Audited) (Unaudited) SAR '000 SAR '000 SAR '000 Pure Breed Company Opening Balance 36,886 34,723 34,723 Add : Share of Results for the period 430 4, Less : Distributions - (2,134) - Closing Balance 37,316 36,886 34,826 International Pediatric Nutrition Company Opening Balance 11,679 10,318 10,318 Add : Capital Introduced 2,500 23,501 - Less : Share of Results for the period (6,419) (22,140) (5,677) Closing Balance 7,760 11,679 4,641 Almarai Company W.L.L. Opening Balance Closing Balance United Farmers Holding Company Add : Capital Introduced Closing Balance (b) The Zain equity investment of 23.0 million shares at a par value of SAR 10 per share is measured at fair value based on a quoted market price for the shares on the Saudi Arabian (Tadawul) stock exchange at 27 March 2013 of SAR This has resulted in an unrealised loss of SAR million which is shown within other reserves in Shareholders Equity. (c) All other available for sale investments are stated at cost less impairment. 15

18 5. TERM LOANS December (Unaudited) (Audited) (Unaudited) SAR '000 SAR '000 SAR '000 Islamic Banking Facilities (Murabaha) 7,199,629 6,402,409 5,564,863 Saudi Industrial Development Fund 881, , ,960 Other Banking Facilities 295, , ,218 Agricultural Development Fund 2,000 2,126 3,000 8,378,887 7,654,561 6,664,041 Sukuk 2,300,000 1,000,000 1,000,000 10,678,887 8,654,561 7,664,041 (a) (b) (c) (d) The borrowings from Islamic banking facilities (Murabaha) are secured by promissory notes given by the Group. The borrowings of the Group from the Saudi Industrial Development Fund are secured by a mortgage on specific assets amounting to SAR million as at 2013 (SAR million as at 31 December and SAR million as at ). The other banking facilities represent borrowings of foreign subsidiaries from foreign banking institutions. As per the terms of the Sukuk arrangements, the Company is entitled to commingle its own assets with the Sukuk Assets. Sukuk Assets comprise the sukukholders share in the Mudaraba Assets and the sukukholders interest in the Murabaha Transactions, together with any amounts standing to the credit of the Sukuk Account and the Reserve retained by the Company from the Sukuk Account. On 14 Rabi Thani 1433 A.H. (7 March ), the Company issued its first Sukuk Series I amounting to SAR 1,000.0 million at a par value of SAR 1.0 million each without discount or premium. The Sukuk issuance bears a return based on SIBOR plus a pre-determined margin payable semi-annually in arrears. The Sukuk is due for maturity at par on its expiry date of 30 Jumad Thani 1440 A.H. (7 March 2019). On 20 Jamad Awal 1434 A.H. ( 2013), the Company issued its second Sukuk - Series II amounting to SAR million at a par value of SAR 1.0 million each without discount or premium. The Sukuk issuance bears a return based on SIBOR plus a pre-determined margin payable semi-annually in arrears. The Sukuk is due for maturity at par on its expiry date of 7 Shabaan 1441 A.H. ( 2020). On 20 Jamad Awal 1434 A.H. ( 2013), the Company issued its second Sukuk Series III amounting to SAR million at a par value of SAR 1.0 million each without discount or premium. The Sukuk issuance bears a return based on SIBOR plus a pre-determined margin payable semi-annually in arrears. The Sukuk is due for maturity at par on its expiry date of 15 Rajab 1439 A.H. ( 2018). 16

19 6. SEGMENT INFORMATION The Group s principal business activities involve manufacturing and trading of dairy and juice products under the Almarai, Beyti and Teeba brands, bakery products under the brands L usine and 7 Days, poultry products under the Alyoum brand, arable and horticultural products as well as other activities. The segment Other activities comprises investment activities carried out by the Group and include other assets and liabilities not directly allocable to any reportable segments. Selected financial information as of 2013, 31 December and and for the periods then ended categorized by these business segments, are as follows: Dairy and Bakery Arable and Other Juices Products Poultry Horticulture Activities Total SAR '000 SAR '000 SAR '000 SAR '000 SAR '000 SAR ' (Unaudited) Sales 1,903, , ,115 24,429-2,431,075 Third Party Sales 1,901, , ,115 6,852-2,411,031 (Depreciation) / Appreciation (140,072) (31,672) (15,868) (17,648) (3,644) (208,904) Income / (loss) before Minority Interest 250,425 34,325 (46,058) 26,737 (16,936) 248,493 Total Assets 12,833,243 2,023,207 4,127,664 1,683,633 1,004,833 21,672,580 Total Liabilities (11,872,989) (337,117) (317,391) (238,375) (535,343) (13,301,215) 31 December (Audited) Sales 7,988,406 1,290, , ,032-10,169,433 Third Party Sales 7,972,686 1,290, , ,315-9,882,996 (Depreciation) / Appreciation (481,331) (114,150) (50,340) (68,332) - (714,153) Income / (loss) before Minority Interest 1,371, ,820 (96,800) 30,880 (37,761) 1,439,910 Total Assets 11,046,963 2,002,505 3,728,592 1,736,202 1,004,386 19,518,648 Total Liabilities (10,050,022) (233,468) (287,503) (243,693) (532,972) (11,347,658) (Unaudited) Sales 1,638, ,539 95,399 24,467-2,052,370 Third Party Sales 1,635, ,539 95,399 15,734-2,040,349 (Depreciation) / Appreciation (102,213) (26,108) (10,110) (16,643) - (155,074) Income / (loss) before Minority Interest 270,869 35,210 (31,981) (20,065) (9,161) 244,872 Total Assets 10,363,328 1,965,294 2,471,505 1,650,391 1,251,759 17,702,277 Total Liabilities (8,546,601) (269,172) (256,482) (208,719) (530,023) (9,810,997) 17

20 The business activities and operating assets of the Group are mainly concentrated in GCC countries, and selected financial information as at 2013, 31 December and and for the periods then ended, categorized by these geographic segments are as follows: 2013 (Unaudited) (Unaudited) SAR '000 SAR '000 Sales Saudi Arabia 1,576,484 1,441,238 Other GCC Countries 624, ,471 Other Countries 210,374 29,640 Total 2,411,031 2,040, December 3 1 March (Unaudited) (Audited) (Unaudited) SAR '000 SAR '000 SAR '000 Non - Current Assets Saudi Arabia 14,525,479 14,053,017 12,858,909 Other GCC Countries 309, , ,289 Other Countries 1,572,165 1,604,073 1,650,267 Total 16,406,795 15,957,625 14,703,465 Analysis of sales is given by product group as shown below (Unaudited) (Unaudited) SAR '000 SAR '000 Fresh Dairy 953, ,243 Long Life Dairy 258, ,454 Fruit Juice 288, ,253 Cheese and Butter 394, ,935 Bakery 340, ,539 Poultry 162,115 95,399 Arable and Horticulture 6,852 15,734 Other Dairy 5,851 11,792 Total 2,411,031 2,040,349 18

21 7. EARNINGS PER SHARE Basic Earnings per Share ( EPS ) is calculated by dividing net income for the period by million shares which represent the weighted average number of shares issued at 2013 and less treasury shares. Diluted Earnings per Share is calculated by dividing net income for the period by million shares which represent the weighted average number of issued shares at 2013 and including treasury shares. However, as the impact of dilution is not material, the diluted EPS is approximately same as basic EPS. In both cases the weighted average number of shares has been retrospectively adjusted for the prior period to reflect the effect of the bonus share issue. 8. DIVIDENDS APPROVED On 22 Jumad Awal 1434 A.H. (2 April 2013) the Extraordinary General Assembly Meeting approved a dividend of SAR million (SAR 1.25 per share) for the year ended 31 December which will be paid on 30 Jumad Awal 1434 A.H. (10 April 2013). 9. SUBSEQUENT EVENTS In the opinion of the management, there have been no significant subsequent events since the period end that would have a material impact on the financial position of the Group as reflected in these interim consolidated financial statements. 19